Airbags inflate European auto recycling costs in Japan

TOKYO -- Europe sees them as a potential terrorist device. In Japan, they are more of a noisy irritant.

Car airbags, or the cost of dismantling them when scrapping a car, are proving to be a major headache for Europe's leading carmakers looking to challenge Japanese car giants on their own turf.

Under new laws set to take effect in Japan in January, carmakers will be responsible for recycling airbags, freon gas and nonmetallic scrap from end-of-life vehicles.

This will be tough for domestic companies, but even tougher for Europeans who command 4 percent of Japan's car and truck market and who have different recycling rules at home.

The European Union sees airbag inflators as pyrotechnical devices that can be misused by terrorists. In Japan, they are seen more as a source of noise pollution.

That difference is set to make it more expensive for Europeans such as Volkswagen AG to compete in Japan, a market where they are perpetual also-rans against some of the world's top carmakers such as Toyota Motor Corp., Nissan Motor Co. Ltd. and Honda Motor Co. Ltd.

It also highlights the hurdles global carmakers face under varying regional rules in an increasingly borderless industry.

"It's general practice in Europe to make it impossible for anybody to take the (airbag) inflator out," said Alfred Bauberger, technical director at Autoliv AB of Stockhom, the world's top airbag supplier.

Not so in Japan where about 4 million cars are scrapped each year.

Under the new law, airbag modules must be removed and sent to one of three facilities certified to treat them. Firing the airbags on-board is cheaper and preferred, but only allowed if the dismantler has a contract with the car's maker.

"Some dismantlers are in residential areas, so they can't activate the inflators on board. It would be too loud," said Akihiko Miyamoto at the Ministry of Economy, Trade and Industry.

Airbags inflate within milliseconds of a collision when a sensor triggers the release of nitrogen gas, which fills the sack. The mechanism, in essence, is a small, contained explosion.

Bauberger said removing and transporting airbag modules is time-consuming, costly and potentially dangerous.

"By firing the inflators in the car, you avoid any risk of an ignition during the handling later on," he said.

European companies say it makes little sense to customize Japan-bound cars to meet the new law as sales volumes are small.

To cut recycling costs, they want Japan's 5,000 or so dismantlers to agree to set off their airbags on-board. One expert reckoned removing the modules would cost $4.50 more per unit than activating them in the car.

But, to strip down airbags on European cars efficiently, dismantlers would need to spend about $900 on a special tool -- a hard sell given that few imported cars are scrapped in Japan. Most are exported as used cars.

BIG BURDEN

By year end, carmakers must also produce manuals on treating airbags on any of the 74 million cars on the road.

VW, Japan's top foreign car brand, says compiling and translating a 300-page manual, plus another one for its Audi unit, will be a burden for its local work force of 500.

All this for just 56,050 cars sold last year -- less than half what Toyota typically sells in a month.

"For us as importers this is an added burden," said Hauke Bruhn, VW's technical director in Tokyo.

Under the law, the price of a car will include a set fee of about $120 for a sedan to cover recycling charges, but carmakers will split infrastructure costs -- such as a $90 million database on all end-of-life vehicles and annual costs of $18 million -- in proportion to market share.

Europeans fear they will end up bearing a disproportionate burden because their cars are less likely to be junked in Japan.

According to industry estimates, about one in five used cars is shipped out of Japan, but experts say the number is far higher for foreign brands. If a used car is exported, the recycling fee is returned to the last owner.

"That means the overhead cost per car of running this system ends up being higher for importers, particularly luxury brands (where) exports could be more than 50 percent," said Anthony Millington, director-general of the European Automobile Manufacturers' Association in Tokyo.

"We all know a Rolls-Royce would never meet the end of its life in Japan. In an extreme case, the difference (in overhead cost) could be hundreds of dollars per car."

Japan's new recycling law is also two years ahead of the European Union in requiring the precise content of a car's nonmetallic scrap, or automobile shredder residue, called ASR, to be measured, something the ACEA estimates could take three to four months and cost up to $30,000 per vehicle.

Even Toyota, the world's richest carmaker, says this is not easy.

"We keep close tabs on the material used in our car parts, so it's possible to figure out a car's ASR content," said Hiroyuki Watanabe, who oversees Toyota's environmental division.